Question 1

If the government quit subsidizing a product, consumer surplus would _____ and producer surplus would _____.
A) increase; decrease
B) decrease; decrease
C) increase; increase
D) decrease; increase

Accepted Answer

When the government stops subsidizing a product, the price of the product typically increases because the cost of production or selling price is no longer offset by the subsidy. This leads to a decrease in consumer surplus because consumers have to pay more for the product or may buy less of it. Producer surplus also decreases because the producers lose the financial support from the government, which might have helped them to sell at lower prices or produce more efficiently, leading to potentially lower sales or higher production costs.

Question 2

(Figure: Market for Comic Books I) The quota at S₂ causes consumer surplus to: A) increase from $8 to $16. B) decrease from $8 to $2. C) decrease from $16 to $12. D) decrease from $12 to $4.

Accepted Answer

The answer of (Figure: Market for Comic Books I) The...

Question 3

The supply and demand for solar panels are given by Q^S = 5P - 5,000 and Q^D = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. Before the subsidy, producers receive ____ and after the subsidy, producers receive ____. A) $2,000; $1,750 B) $2,000; $2,250 C) $2,250; $2,000 D) $1,750; $2,250

Accepted Answer

Before the subsidy, the equilibrium price is found by setting QS equal to QD: $5P - 5000 = 15000 - 5P$. Solving for P gives $10P = 20000$, so $P = 2000$. After the subsidy, the supply equation becomes $5(P+500) - 5000 = 5P + 2500 - 5000$, or $5P - 2500$, because producers receive an extra $500 per panel. Setting the new supply equal to the original demand, $5P - 2500 = 15000 - 5P$, solving for P gives $10P = 17500$, so $P = 1750$. However, producers receive $P + 500 = 2250$ after the subsidy.

Question 4

(Figure: Market for Peanuts I) Suppose the government enacts a price ceiling of $250 per ton. Which of the following statements are TRUE?  I. Consumer surplus before the price ceiling is area A + B + C.
II) Consumer surplus after the price ceiling is area D + E.
III) Producer surplus before the price ceiling is area D + E + G.
IV) Producer surplus after the price ceiling is area F.
A) I, II, and IV
B) I and IV
C) II and III
D) II, III, and IV

Accepted Answer

The answer of (Figure: Market for Peanuts I) Suppose the...

Question 5

Suppose that a local government has imposed a quota of 0.5 million gallons on water usage. Before the quota is enforced, the market demand curve is given by Q^D = 10 - 2.25P And the market supply curve is given by Q^S = -10 + 2.75P Where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons. After the quota is imposed, the quantity demanded becomes ____. A) 1,000,000 B) 500,000 C) 1,500,000 D) 1,605,000

Accepted Answer

The quota limits the quantity to 0.5 million gallons, directly setting the quantity demanded to this level, regardless of the demand curve equation.

Question 6

The supply and demand for solar panels are given by Q^S = 5P - 5,000 and Q^D = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. Before the subsidy, consumers pay price ____ and after the subsidy, consumers pay price ____. A) $2,000; $1,750 B) $2,000; $2,250 C) $2,250; $2,000 D) $1,750; $2,250

Accepted Answer

Before the subsidy, to find the equilibrium price, set the supply and demand equations equal to each other: $5P - 5,000 = 15,000 - 5P$. Solving this equation gives $P = \$2,000$. After the subsidy, the effective price that suppliers receive is $P + \$500$. Adjust the supply equation to $5(P + 500) - 5,000 = 5P + 2,500 - 5,000$, which simplifies to $5P - 2,500$. Setting this new supply equal to the original demand, $5P - 2,500 = 15,000 - 5P$, solving gives $P = \$1,750$.

Question 7

(Figure: Market for Tickets II) As a result of the tax, the deadweight loss is:
​ 
A) B + E.
B) B + C + E + F.
C) E + F.
D) B + C.

Accepted Answer

The answer of (Figure: Market for Tickets II) As a...

Question 8

(Figure: Price and Quantity VII) The area that represents producer surplus with the demand curve D₁ is _____, and the area that represents producer surplus with the demand curve D₂ is ____. A) D; C + D + E B) D; D + C C) C + D + E; D D) B + C; A + B

Accepted Answer

The answer of (Figure: Price and Quantity VII) The area...

Question 9

(Figure: Market for Tickets II) Refer to Figure: Market for Tickets II to answer the following question.  Before the tax, consumer surplus is ____ and after the tax, consumer surplus is ____.
A) A + B + E; A
B) A + B + E; B
C) A + B + C + D +E + F; A + B + C + D
D) A + B + C; A + B + C + D

Accepted Answer

The answer of (Figure: Market for Tickets II) Refer to...

Question 10

(Figure: Price and Quantity I) The decrease in supply from S₁ to S₂ will cause consumer surplus to _____ and producer surplus to _____. A) decrease by $10.50; decrease by $4.50 B) decrease by $5.50; increase by $3 C) increase by $6; decrease by $18 D) decrease by $10.50; decrease by $6.67

Accepted Answer

The answer of (Figure: Price and Quantity I) The decrease...

Question 11

Suppose the demand and supply curves for shampoo are given by Q^D = 18 - 5P Q^S = -3 + 2P Where Q^D is the quantity of shampoo demanded (in thousands of bottles), Q^S is the quantity supplied, and P is the price of shampoo (in dollars per bottle). The consumer surplus at the equilibrium price is ____. A) $9 B) $900 C) $450 D) $4.50

Accepted Answer

The answer of Suppose the demand and supply curves for...

Question 12

Which of the following payroll taxes would be most beneficial for workers (e.g., provide the highest after-tax wage)?
A) 5% on workers and 10% on employers
B) 9% on workers and 6% on employers
C) 12% on workers and 1% on employers
D) 2% on workers and 14% on employers

Accepted Answer

The answer of Which of the following payroll taxes would...

Question 13

Suppose the demand and supply curves for units of university credits are given by Q^D = 5,000 - P Q^S = -1,000 + 4P Where Q^D is the quantity of credits demanded, Q^S is the quantity supplied, and P is the price in dollars for each unit. Consumer surplus at the equilibrium price is ____. A) $14,440,000 B) $7,800,000 C) $6,000,000 D) $7,220,000

Accepted Answer

To find the equilibrium price, set the quantity demanded equal to the quantity supplied: $5,000 - P = -1,000 + 4P$. Solving for $P$, we get $5P = 6,000$, so $P = 1,200$. To find consumer surplus, we need the maximum price consumers are willing to pay (where quantity demanded would be zero), which from the demand equation is $5,000 = P$, so $P = 5,000$. Consumer surplus is the area of the triangle formed by the demand curve above the equilibrium price, which is $\frac{1}{2} \times (5,000 - 1,200) \times (5,000)$ = $\frac{1}{2} \times 3,800 \times 5,000$ = $9,500,000$. However, this calculation is incorrect based on the given formulas and the correct approach to calculate consumer surplus. The correct approach involves finding the area under the demand curve above the equilibrium price, which was not accurately described in the initial explanation. The correct consumer surplus calculation should involve integrating the demand curve or using the correct geometric formula based on the specifics of the demand curve and the equilibrium price, which was not properly accounted for in the provided solution.

Question 14

Suppose the demand and supply curves for shampoo are given by Q^D = 18 - 5P Q^S = -3 + 2P Where Q^D is the quantity of shampoo demanded (in thousands of bottles), Q^S is the quantity supplied, and P is the price of shampoo (in dollars per bottle). The equilibrium price in this market is ____ and the equilibrium quantity is ____. A) $3; 3,000 B) $3; 900 C) $6; 6,000 D) $2; 8,000

Accepted Answer

To find the equilibrium price and quantity, set the quantity demanded equal to the quantity supplied: 18 - 5P = -3 + 2P. Solving for P gives P = $3. Substituting P = $3 into either equation gives the equilibrium quantity of 3,000 bottles.

Question 15

(Figure: Market for Tickets II) Before the tax, consumers pay the price ____ and after the tax, consumers pay the price ____. 
A) $5.50; $6.00
B) $5.50; $6.50
C) $6.00; $5.50
D) $5.00; $6.00

Accepted Answer

The answer of (Figure: Market for Tickets II) Before the...

Question 16

Suppose that the demand curve for brown rice is given P= 50,000 - 3Q², and supply is P = -10,000 + 3Q². The consumer surplus at the equilibrium price is ____. A) $1,000,000 B) $200,000 C) $100,000 D) $2,000,000

Accepted Answer

The answer of Suppose that the demand curve for brown...

Question 17

Suppose that technological breakthroughs make jet packs affordable, convenient, and safe for personal transportation. The demand for automobiles would become _____ the consumer surplus from automobiles.
A) more price elastic, decreasing
B) more price inelastic, increasing
C) more price inelastic, decreasing
D) perfectly inelastic, increasing

Accepted Answer

With the introduction of jet packs as a viable alternative to automobiles, consumers would have more transportation options, making them more sensitive to changes in the price of automobiles. This increased sensitivity to price changes makes the demand for automobiles more price elastic. As consumers switch to using jet packs, the value they derive from automobiles decreases, leading to a decrease in consumer surplus for automobiles.

Question 18

(Figure: Market for Grapefruits I) At a market price of $4, what is total consumer surplus? 
A) $120
B) $320
C) $160
D) $80

Accepted Answer

The answer of (Figure: Market for Grapefruits I) At a...

Question 19

Suppose that the demand curve for brown rice is given by P= 50,000 - 3Q², and supply is P = -10,000 + 3Q². The equilibrium price is ____ and the equilibrium quantity is ____. A) $110,000; 200 B) $20,000; 100 C) $100; 20,000 D) $2,000; 1,000

Accepted Answer

To find the equilibrium, set the demand equal to supply: 50,000 - 3Q² = -10,000 + 3Q². Solving this gives Q = 100. Substitute Q = 100 into either equation to find P = 20,000.

Question 20

(Figure: Market for Good X I) Which of the following statements is (are) TRUE?  I. A tax on buyers of $3 per unit raises the price buyers pay to $6.
II) A tax on sellers of $3 per unit raises the price buyers pay to $6.
III) With a tax on sellers of $3 per unit, the share of the tax paid by buyers is 67%.
A) I, II, and III
B) I and III
C) II and III
D) I

Accepted Answer

The answer of (Figure: Market for Good X I) Which...

Quiz 3: Using Supply and Demand to Analyze Markets

If the government quit subsidizing a product, consumer surplus would _ and producer surplus would _.

(Figure: Market for Comic Books I) The quota at S₂ causes consumer surplus to:

(Figure: Market for Tickets II) As a result of the tax, the deadweight loss is:

(Figure: Price and Quantity VII) The area that represents producer surplus with the demand curve D₁ is _, and the area that represents producer surplus with the demand curve D₂ is .

(Figure: Market for Tickets II) Refer to Figure: Market for Tickets II to answer the following question. Before the tax, consumer surplus is and after the tax, consumer surplus is .

(Figure: Price and Quantity I) The decrease in supply from S₁ to S₂ will cause consumer surplus to _ and producer surplus to _.

Which of the following payroll taxes would be most beneficial for workers (e.g., provide the highest after-tax wage) ?

Suppose the demand and supply curves for units of university credits are given by Q^D = 5,000 - P Q^S = -1,000 + 4P Where Q^D is the quantity of credits demanded, Q^S is the quantity supplied, and P is the price in dollars for each unit. Consumer surplus at the equilibrium price is ____.

(Figure: Market for Tickets II) Before the tax, consumers pay the price and after the tax, consumers pay the price .

Suppose that the demand curve for brown rice is given P= 50,000 - 3Q², and supply is P = -10,000 + 3Q². The consumer surplus at the equilibrium price is ____.

Suppose that technological breakthroughs make jet packs affordable, convenient, and safe for personal transportation. The demand for automobiles would become _____ the consumer surplus from automobiles.

(Figure: Market for Grapefruits I) At a market price of $4, what is total consumer surplus?

Suppose that the demand curve for brown rice is given by P= 50,000 - 3Q², and supply is P = -10,000 + 3Q². The equilibrium price is and the equilibrium quantity is .

Quiz 3: Using Supply and Demand to Analyze Markets

If the government quit subsidizing a product, consumer surplus would _____ and producer surplus would _____.

(Figure: Market for Comic Books I) The quota at S2 causes consumer surplus to:

(Figure: Market for Tickets II) As a result of the tax, the deadweight loss is: ​

(Figure: Price and Quantity VII) The area that represents producer surplus with the demand curve D1 is _____, and the area that represents producer surplus with the demand curve D2 is ____.

(Figure: Market for Tickets II) Refer to Figure: Market for Tickets II to answer the following question. Before the tax, consumer surplus is ____ and after the tax, consumer surplus is ____.

(Figure: Price and Quantity I) The decrease in supply from S1 to S2 will cause consumer surplus to _____ and producer surplus to _____.